If you’re Canadian citizen buying an Arizona home or in the United States, understanding the Mortgage process for Canadian Citizens buying a home in Arizona will help make it a smooth transaction. The more you know about it, the easier it will be.

Step 1 – Applying for a  U.S. Mortgage Loan

The process can begin via phone or in person with an RBC Mortgage Loan Officer (MLO) that provides the information needed to make informed, smart decisions. Your CLS will discuss your financing needs; present product options and explain how different options affect your payments, interest rates, and principal reductions.

After product selection and application, you will be provided with a Good Faith Estimate and other early disclosures that review the costs associated with getting the loan and the loan structure. They will review the mortgage loan approval process and how that might be different from what you are accustomed.  Your RBC MLO will give you an indication of whether or not you have preliminary approval for the product chosen.* You will need to provide information to verify your income,** assets,** debt and residence history.

Step 2 – Processing

After your completed mortgage application is received, a Canadian credit report is obtained to verify your credit rating. You may also be asked for additional documentation.  A 3^rd party appraisal and title work will be ordered to verify the value of the property and to verify current lien holders on the property. Then, your RBC MLO will lock in your interest rate on the mortgage product you chose. This process usually takes 5-10 business days.

Step 3 – Underwriting may come back with conditions

Your loan will be submitted to the underwriting department for approval. Underwriting may come back with conditions. Your MLO will review and explain each condition. Once your loan is approved to close, you will be notified and closing documents will be prepared and sent to the location where the closing will be held.

Step 4 — Closing typically takes 30-40 days to complete

In the U.S., it is customary for the borrower to attend the closing; however closings may be negotiated by mail. Many closing agents require Canadians to sign in front of a US Notary. This could require the borrower to schedule an appointment with their local US Embassy or Consulate. The paperwork presented at closing is extensive and legally requires the signature of borrowers. If you’re unable to attend the closing, your MLO must be notified in advance, as well as your attorney, so they can set up a process for the loan to close without you there. Please understand that closings not conducted in person by the borrower may take additional time to complete. In addition, some state laws require the lender to have completed documentation prior to funding.

This process, from application to closing, typically takes 30-40 days to complete.

Please do not hesitate to contact Christopher Wyatt with any of your loan questions or if you are looking to shop for a mortgage loan.

Mortgage Consultant | RBC Bank (USA) | T. 407-244-6002 | F. 775-429-7554 C. 407-739-2265

In the not-so-distant past, that’s practically all it took to qualify for a mortgage. Now an exhaustive array of paperwork awaits potential borrowers.

Preparation Is Key

Call it the new mortgage reality.  Lenders that got burned when the housing market collapsed are taking extra steps to protect themselves and are requiring more financial documents than ever.
But these tougher requirements don’t mean getting a mortgage has to be too stressful, as long as you’re prepared.

Five Ways To Prepare For A Mortgage Loan

Here are five ways to cut down on the hassles and help you anticipate the records you may need:

1. Start by requesting your free credit report.

You won’t receive a copy of your credit score, but it’s important to review a report from the three credit reporting agencies: Experian, TransUnion and Equifax. Make sure the information on each is correct.

If you have any late payments or recent inquiries on your report, prepare to explain the circumstances to a lender in writing. You’ll have to settle any open collections, tax liens or judgments before you close the mortgage.

“There is such a thing as not enough credit,” says John Stearns, a broker at American Fidelity Mortgage in Wisconsin. He says some borrowers only have one credit card and no other credit accounts such as car loans, cell phone bills or student loans. Ideally, lenders like to see borrowers manage at least three accounts to show they can handle credit responsibly.

2. Organize all your financial documents.

Lenders will ask for at least two months’ worth of pay stubs and bank statements. Pull out 2009 and 2010 federal tax returns, W-2’s and 401(k) statements.
If you receive alimony or child support, request up-to-date records from the court, which can take up to 90 days.

Make sure your name, address and account numbers are correct on all statements. If you recently changed your name because of marriage or divorce, make sure the update is reflected on all financial documents and that they match your identification cards. The same guidelines apply for your address if you recently moved.

3. Keep your finances simple for at least two months.

“Don’t do anything funny with your money, or it could cost you,” says Pava Leyrer, president of Heritage National Mortgage in Michigan.
That means don’t make any out-of-the-ordinary deposits into your checking account, whether it’s gift money, cash from selling a car or payments from giving piano lessons. If you do, make sure to have receipts and copies of checks to give to the lender to show the source of the funds.

One of Leyrer’s recent borrowers had to write a letter to a lender explaining that a $55 bank deposit was birthday money from grandma. Another had to prove that paintings she sold at a yard sale would sell for a similar amount on eBay or Craigslist.

Another pitfall: paying off a large debt ahead of applying for a mortgage.

A lender will want to know where that big sum of money came from. Lastly, don’t overdraw your checking account for at least two months. Even if you have overdraft protection, the lender will think you have cash flow problems.

4. Document your down payment.

That means if you received a large amount from an inheritance, request the documents from the estate trustee to prove you rightfully were given the money. A down payment that taps money from a money market fund or other account requires a statement showing the transfer into your checking account. A 401(k) loan also must be documented.

If you receive all or part of the down payment as a gift from a relative, you’ll be asked to produce a letter that outlines your relationship to the gift giver, the address of the property, the amount of the gift, where the giver got the funds, and a statement that the gift is not a loan.

A good rule of thumb: Any money going toward the down payment should be in your account at least two weeks before closing, including paychecks and bonuses.

5. Show a stable work history for the past two years.

Coming out of a recession, many borrowers might need to explain any employment gaps in writing. Also, those who took temp jobs or switched careers to deal with the hard times may have to field questions from the lender and may want to wait an additional year to apply.

Another red flag for lenders: a wage cut or a change in compensation from, say a salaried position to one where you earn commissions.

Please do not hesitate to contact me with any of your loan questions or if you are looking to shop for a mortgage loan.

Christopher Wyatt

Mortgage Consultant | RBC Bank (USA) | T. 407-244-6002 | F. 775-429-7554

C. 407-739-2265

Question: I am panicked!  My client retired in July and now her lender, a major bank, declined her loan because I have no job.  But she has nearly $500,000 in her retirement fund.  Is there anything we can do to qualify her for a home loan?

Answer: There are many types of earnings other than the hourly/salaried positions.   For instance, does your client receive social security, or a pension?   A majority of individuals usually retire in their 60′s.  Anyone over the age of 62 and a half is eligible for social security.

What about Child Support and Alimony?

Child Support and Alimony can be used as income,as long as the client has been receiving it for three months and will continue to receive it for at least three years.  They will need a court order for child support and a divorce decree or a filed separation agreement for the alimony. Although many of us continue to support our kids, way past their 18^th birthday, most child support agreements only go to age 18.  Therefore, if the child is 16, it will be kicked out.

What Does Qualify as Income?

Taking money from your (ex) husband’s joint bank account who you are considering divorcing will not count.

A monthly allowance from Mummy and Daddy does not qualify for income. Sorry.

Social Security for disability is allowed but can be sticky because a letter is required from the doctor stating the disability will last for at least three more years.  If you bashed your head on your computer while cruising face book and as a result of the unfortunate mishap, receive short term disability: you will have to go back to work to qualify.

And unfortunately if you were laid off from your job, unemployment insurance is not a viable source for monthly wages.  Exception: if your borrower works construction in Duluth, Minnesota for the past 20 years and he receives unemployment every December and January due to weather, it may be considered.

Can I Draw on my Retirement Account?

If your client is lucky enough to retire at an early age, she could start taking monthly withdrawals from her retirement account with the same amount deposited into her checking account every month.  As long as it is tracked and paper trailed she could meet underwriting criteria for qualification.

If this is your situation, you might want to talk with another lender. The bank loan officer may not have studied the loan officer hand book and may not be aware of the many other alternatives for income.

If you are looking to be pre-qualifed for a loan or need mortgage advice, please contact me directly at 480-235-5667 or 623-556-3145 .

Diane Gerdes

diane@dianegerdes.com

The Mortgage Advantage, Inc.

Answering you or your clients’s lending questions 7 days a week.

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Question:

I sold my Arizona home as a short sale and now want to purchase another Phoenix home.  What are my options?

Answer:

Fannie Mae or conventional loans up to $417,000 has finally addressed the issue of buying after a short sale.

The  following guidelines are effective after July 1, 2010:

• Two year wait with 20% down
• Four year wait with 10% down (and mortgage insurance company approval)

If there are extenuating circumstances defined as nonrecurring events that are beyond the borrower’s control such as a death, or act of God, or serious illness (divorce or a change in employment does not count), the following is the guideline also effective July 1, 2010: Two year wait with a minimum of 10% down

The extenuating circumstance will need to be documented.  A few years ago, back when you could do low credit score borrowers, one of our clients was late on her house payment due to a tornado destroying it. (No, it wasn’t a mobile home) She provided before and after pictures.  As a result of her careful documentation she was approved for her loan.

Desktop underwriting requires tweaking to mirror the updated short sale requirements. What does that mean to you? As of today, the automated underwriting systems may spit out a positive decision if the credit scores are high enough. An unknowing loan officer may think the loan is approved.  Your client could get all the way to underwriting, only to find out the borrower does not meet the current guidelines.

Also, credit will need to be re-established.  Fannie is still working on the exact requirements.  But a good guess would be the following:

• Credit scores above 680
• No late payments or collections
• Three lines of current, established credit

FYI:

FHA will immediately finance a buyer after a short sale as long as the lender did not report any lates on their mortgage the previous 12 months before the sale; and they were not late on any installment debt.

The Mortgage Answer Hotline 480-304-8230 Answering your lending questions 7 days a week.

The Mortgage Advantage, Inc.      1-800-499-2183

I’ll try to explain it without everyone crossing their eyes.

So here it goes: Mortgages remain outstanding on average about 10 to 12 years, so rates on 30-year mortgages tend to track the yields on 10-year Treasury notes. The Feds hold weekly treasury auctions to raise billions of dollars to help keep our country running and to pay down our $1.4 trillion dollar deficit. Treasury notes bear a stated interest rate, and the owner receives semi-annual interest payments. The market determines the sales price not the government.

In general, 30-year mortgage rates are about two percentage points higher than the 10 year bond, but during this economic downturn the spread has been less.

Last week, the yield on the benchmark 10-year jumped to its highest point in almost 9 months. Our government held an auction and the investors didn’t show.  Therefore the mortgage rates spiked upward.

Over the past year we learned a new word, layering.  There is “layering” of the rates for mortgages. For example, a lower credit score could mean a higher interest rate. One bank advertises scores below 800 will pay  increased rates.  Really, I can’t make this stuff up.   Also, second homes could see a little bump.   Investment properties and low loan amounts qualify for increased mortgage rates.

Feds Stop Purchasing Mortgage Backed Securities

FYI: Today is the last day the Feds will be purchasing mortgage backed securities that provided much-needed liquidity for government-run mortgage financing companies, Freddie Mac and Fannie Mae.  This program gave these institutions the money to buy bank loans issued to home buyers.  Rumor has it that we may see increased mortgage rates because of the lack of buyers for mortgage backed securities.

Author: Diane Gerdes is with Mortgage Advantage, Inc and can be found on Facebook and is available to answer all your lending questions! Find Diane on Facebook

From a recent WSJ article:

“…this political history may be repeating itself with the Federal Housing Administration, which yesterday announced that its capital reserve ratio has fallen to 0.53%. That cushion is far below the 2% of its liabilities that Congress mandates, itself a 50 to 1 leverage ratio, and down from 3% last autumn. The FHA’s mortgage guarantees in 2009 are four times higher than they were in 2007. Nearly 18% of its loans are 30 days or more past due, while mortgages guaranteed in 2007 are “on par with FHA’s worst-ever books from the early 1980s,” according to the Department of Housing and Urban Development’s report to Congress. The financial deterioration is the result of the agency’s plunge into high-risk loans over the last two years, asking dangerously low down payments of 3.5% from unqualified borrowers.”

Many different places are writing how borrowers who qualified just a few years ago for a subprime loan are now using FHA loans to finance their homes. Or, at least that is the impression that some people seem to be getting.

Seems to only make sense because there are no more subprime loan programs left… and someone should sound the alarm, right?

Maybe.

But I personally wouldn’t put those data points together and come to a conclusion.

You see, FHA guidelines are getting more strict, not less. Minimum credit scores that are required by many lenders are now 640 and the trend seems to be toward more tightening. The FHA streamline refinance now has much more stringent qualification criteria – not like the FHA streamline refinance that was around for at least the last decade.

So if indeed, FHA comes out and says they need a bailout, why do they need a bailout if they are not the new subprime?

My opinion – because many, many people are struggling with employment (either being unemployed or underemployed) and when many homes are worth less than the mortgage on the home – default numbers are going to skyrocket.

No matter if they are FHA loans or not.

But now there is something even better – even more money – if you agree to buy a foreclosed home, meet a few financial requirements and agree to attend 8 hours worth of home buyer counseling.

The “free money” mortgage program is called the National Stabilization Program and on top of giving you money to buy and live in a home, it is required that you only have a 1% down payment when combined with an FHA loan.

National Stabilization Program Highlights:

• If you own a residence, you must be leasing your primary residence at least 12 months before applying for the program.
• You must use us a lender from the ADOH participating lender list.
• You must attend and complete an eight‐hour Homebuyer Education Class provided by one of the ADOH participating home buyer counseling agencies. (A list will be provided by your lender once you begin the process.)
• The property you purchase must be your primary residence.
• You must have a maximum debt‐to‐income ratio of 31/43.
• You must be AUS approved eligible.
• You must have two months PITI reserves.
• You can use any type of financing with the NSP program – including paying cash. That means you can still get up to 22% of the purchase price even if you pay cash for the house.
• You must be approved and have your paperwork completed for the program prior to submitting an offer on a house.

National Stabilization Eligible Property Types:

• Foreclosed properties only.  A property is considered “foreclosed upon” at the point that the mortgage or tax foreclosure is complete.
• One‐unit detached single family homes, condos and townhomes.
• The property must be vacant at time of listing.

National Stabilization Program Purchase Price Limits: 

There are limits to how much of a house will qualify for the program – below are the purchase price limits for the counties in Arizona:

National Stabilization Program Income Limits:

In order to qualify for the program, you must have a gross income (the total income before taxes, health care costs, social security, etc.) of no more than 120 percent of the average median income for the county they want to purchase a foreclosed house in.

Income Limits For Maricopa County:

National Stabilization Program: Down Payment Requirements

A minimum of 3 percent of the property purchase price is required as down payment. One percent must come from the borrower’s own funds. Two percent can come from any other approved source.

National Stabilization Program: How Much Money Can You Get?

1. Up to 22 percent of purchase price
2. All loans are forgivable after a period of time based on the amount of the loan.
   * 5 years for assistance of $15,000 or less
   * 10 years for assistance of $15,001‐$40,000
   * 15 years for assistance of more than $40,000
3. All loans are zero percent interest with no monthly payment.
4. The balance of the loan is forgiven at the completion of the term.

Get Qualified For The Program

Because you have to make sure all of your paperwork is completed prior to submitting an offer – it is important to get in touch with the loan officer as soon as possible so you can get the process started. Right now, there is money available and this program is “real” in the sense that you really can get money to help you buy a home.

Call us anytime – we are happy to help you get the process started.

What many people don’t know is that it can be somewhat tricky to find a lender who is actually helping people monetize the tax credit to use at closing.

Notice that I didn’t say impossible — just tricky.

So tricky, in fact — that I am actually not aware of a lender in Arizona who is currently helping people monetize the 8000 tax credit. That doesn’t mean that someone isn’t doing it — just that I am not aware of any.

But there are many people who need help monetizing the 8000 tax credit, so if you are a lender and happen to be reading this — now is your time to shine! Simply drop a comment with your contact information here and we will be sure to spread the word.

And if you are a person who is interested in how to monetize the 8000 tax credit, be sure to check back here to find out who is doing it and can help you!

This is big news!

Early in May, HUD Secretary Shaun Donovan made a comment when speaking to a National Association of Realtors meeting about how HUD was considering this change to happen. Until Friday, everyone suspected that something was forthcoming, but no one new for sure until Friday when HUD issued their official Mortgagee Letter 2009-15 which outlined the rules of the program.

Being able to “monetize” the tax credit essentially means that you can use the money that you are going to receive for the credit when buying a home here in Arizona. It is expected that as a result of this tax credit, but to 160,000 families will be able to buy homes.

According to Reuters:

The National Association of Home Builders estimates that the $8,000 first-time homebuyer credit will stimulate 160,000 home sales across the United States — 101,000 purchases from first-time buyers and another 59,000 purchases by existing homeowners who sold dwellings to first-time buyers.

For people who are planning on “monetizing” the tax credit, the most popular question about HUD’s guidance is “can I use the tax credit for my down payment?” and the answer to that question is “yes — but  you must have your initial 3.5% down payment first. You cannot use the monetization of the tax credit for the 3.5% down payment.”

Another popular question is “how much does it cost to monetize the tax credit?” The answer to this question is best addressed by HUD in their Mortgagee Letter — they hit the topic head on:

Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)

While many people were hoping that the “monetization program” would allow people to use the tax credit for their down payment, it is difficult to say that HUD did a “bad job” thinking this program through. All in all, I give them high marks for doing whatever they can to help as many people as possible in buying a home without putting loan quality at risk because borrowers don’t have enough vested interest in the transaction.

If you have questions about the monetization plan, be sure to speak with a loan officer at a FHA approved lender – and here are a few other resources as well:

HUD Official Announcement

Official Mortgagee Letter 2009-15

New Home Buyer 8000 Tax Credit Down Payment: Answers To Questions

The new HVCC rules mean that the loan officer who is working on your loan no longer orders the appraisal on your home – it is done through the lender who either has an in-house process for appraisal management issues or more often, it is done through something called an Appraisal Management Company.

While this may not seem like a big change to you if you are buying a house – it can possibly be a much bigger change than you might think. Prior to May 1, loan officers, Realtors and appraisers all communicated as needed regarding your home and home financing, and it wasn’t uncommon for everyone to be on the same conference call if needed.

But now that the HVCC rules are in place, the only way the loan officer or Realtor will know who the appraiser is is if by chance the appraiser calls them. Don’t expect that to happen too often, if ever.

One of the biggest things that the new HVCC impacts is the timeframe. Loan officers can request that the appraisals be done by a certain date, but we can’t call an appraiser and say “hey, do you think you can put a rush on this thing?” when needed.

So when talking about an appraisal post-May 1 of this year, remember:

1. Loan officers don’t know who the appraiser is
2. Loan officers can’t contact the appraiser even if they do know who it is. Realtors can contact the appraiser if they know who it is.
3. Loan officers do not know when the appraisal will be done.

Are the new HVCC rules regarding appraisals a good thing or bad?  Time will tell.

Here are some thoughts by Peter Thompson, with PTMortgage.com who shares some great insight on the changes and reason why this might not be a good thing! 

"This law was passed a year ago, but with opposition from all the real estate industry groups it was an even bet whether it would actually go into effect. There aren’t any real winners with this new law. It will cause problems for everyone from the appraisers themselves to the consumers who are supposed to benefit from this new program."

Peter says, "Every one loses some control with this new program, but for mortgage brokers, who have been under pressure with all sorts of new rules aimed at them, this will be a big obstacle to over come. If you are shopping for a mortgage, either for a purchase or a refinance, one question you need to ask is what type of company are you dealing with and ask how the new appraisal rules will affect you if you move forward with a loan from that company."

Read more of what PeterT has to say on Home Valuation Code of Conduct.

For more information

• Download the Home Valuation Code of Conduct fact sheet
• Download the Home Valuation Code of Conduct
• Read Frequently Asked Questions
• Find contact information for state appraiser licensing and certification boards